Australia is being urged to strengthen its protections against financial crime emanating from China, with an expert warning the growing relationship with our biggest two-way trading partner creates opportunities for criminals.
Subscribe now for unlimited access.
$0/
(min cost $0)
or signup to continue reading
Financial crime expert Simon Norton has also warned illegal investment might be pushing up house prices and driving legitimate local buyers out of the market.
Chinese investment in Australia's real estate industry has surged, increasing by 400 per cent in the five years to 2014-15 to reach $12 billion.
China is Australia's largest two-way trading partner and money flows from the Asian country into Australia also almost doubled in the five years to 2015-16, increasing from $42 billion to $77 billion.
"This economic relationship is mutually beneficial, but it also creates opportunities for criminals," Mr Norton said in a recent report published by the Australian Strategic Policy Institute in Canberra.
"The large volume of money, goods and people moving between the two countries makes it easier to conceal crimes, such as trafficked drugs or laundered money.
"Much activity also takes place online, making the cyber realm a major vector for cross-border criminal activity."
Mr Norton said real estate agents, conveyancers, lawyers and accountants should be regulated in Australia under the Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) Act.
"That a large portion of suspicious transfers between China and Australia go into real estate is a reminder of the need to harden Australia's anti-money laundering and counter-terrorism-financing system against the misuse of that sector by regulating real estate agents, conveyancers, lawyers and accountants under the AML/CTF Act," Mr Norton said.
"Australia has yet to do this despite proposing to do so for over a decade, and not regulating those industries makes Australia non-compliant with international AML/CTF standards."
He said if regulated, those industries would become responsible for a range of measures including verifying sources of wealth. They would also be required to report suspicious matters to the federal government's financial intelligence agency, AUSTRAC.
That a large portion of suspicious transfers between China and Australia go into real estate is a reminder of the need to harden Australia's anti-money laundering and counter-terrorism-financing system.
- Financial crime expert Simon Norton
Mr Norton said illegal investment could push up asset prices, including house prices, pushing legitimate local buyers out of the market.
"This is particularly troublesome considering the problem of housing affordability in Australia," he said.
In a statement, the Department of Home Affairs said the government was committed to continually improving its anti-money laundering and counter-terrorism financing laws "without placing undue burden on industry".
The government passed the first phase of reforms to Australia's anti-money laundering and counter-terrorism financing regime in 2017, expanding the regime so that it also regulated digital currency exchanges.
The department said consultation was under way on more reforms, which included strengthening Australia's money laundering offences.
Mr Norton also called for the federal government to expand the role of the Foreign Investment Review Board, which examines foreign investment proposals and advises the treasurer and government.
Mr Norton said the board's role should grow to include investigating the sources of money for proposed foreign investments.
Treasurer Josh Frydenberg did not directly address that possibility when asked for comment, but said foreign investment was "an important contributor to Australia's economy and standard of living".
"Australia maintains a non-discriminatory, case-by-case approach to considering foreign investment proposals," Mr Frydenberg said.
Mr Norton's calls are among nine recommendations for the federal government.
While he has recommended Australia strengthen its protections, Mr Norton said Australian police already had one of the strongest relationships of any Western liberal democracy with Chinese law enforcement.